AB 566: Unnecessary legislation that disrupts customer choice and harms small businesses
Small business owners are being inundated by a cascade of government mandates currently being proposed by the Legislature and state agencies. The mandates cover a variety of business operations but are increasingly focused on regulating or eliminating technological advances that help consumers find products and help businesses increase productivity. These costly policies, introduced as so-called “consumer protections”, are having a particular impact on Latino-owned businesses who rely on the internet for low-cost advertising and customer loyalty programs.
AB 566 is one of those mandates. This bill will require an internet browser to include an opt-out signal and authorize the California Privacy Protection Agency (CPPA) to adopt regulations to implement and administer the changes in technology, data collection, obstacles to implementation, or privacy concerns. From my experience with CPPA regulations, we can expect higher compliance costs, fees, fines, penalties, and the standard adds of a growing government bureaucracy. Their own economic impact assessment states that for businesses the “first-year direct costs totaling $3.5 billion and average annual ongoing costs of $1.0 billion.”
Costly policies are always controversial. But right now, they’re practically unworkable. This year the state confronts a $12 billion budget deficit, per Gov. Gavin Newsom’s May Revision. Any further loss in economic activity, like AB 566’s first year and ongoing costs, would be even more harmful than usual.
AB 566 is identical to the bill that was vetoed last year by Gov. Newsom who stated in his veto message “most internet browsers either include such an option or, if users choose, they can download a plug-in with the same functionality. To ensure the ongoing usability of mobile devices, it’s best if design questions are first addressed by developers, rather than by regulators.” The governor’s veto message makes it clear that AB 566 is unnecessary. Consumers who wish to opt out already have multiple browser options and built-in mechanisms to do so. They can make their own choices without government intervention.
Our community has higher rates of engagement on the internet, using online channels to discover and access information about news, products, and services, and interacting with people who have the same cultural interests. Latino consumers want to receive ads, know about sales and new products, and follow events of interest. Our members use the internet as a tool to build a customer base and a loyal following. We develop marketing programs and operate our business at a much lower cost because of the information, data, and services that are available on the internet. If those products and services go away or become business costs, it will be much harder to compete with larger national businesses.
Many members of the Hispanic Chambers of Commerce are small business owners that are facing higher labor and operational costs and need to expand their customer base to stay open. AB 566 makes it more difficult to identify potential customers and communicate with them on an op-going basis about discounts, menu changes, or special events. Consumers that do not want to be contacted have the ability to limit or eliminate advertising. Encouraging and facilitating local residents to disengage with small business will be bad for Latino business owners and the communities where they operate.
A general opt-out signal should not override business and consumer relationships. Small business owners should not be denied access to their customers because of the government’s desire to place unnecessary restrictions on commerce. We urge legislators to reject AB 566 and allow consumers and businesses to develop their own relationships.
Julian Canete is president & CEO of the California Hispanic Chambers of Commerce